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Fair Value of Financial Assets and Liabilities (All Registrants)

9 Months Ended

Sep. 30, 2022

Fair Value of Financial Assets and Liabilities (All Registrants)

Exelon measures and classifies fair value measurements in accordance with the hierarchy as defined by GAAP. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

•Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the Registrants have the ability to liquidate as of the reporting date.

•Level 2 - inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

•Level 3 - unobservable inputs, such as internally developed pricing models or third-party valuations for the asset or liability due to little or no market activity for the asset or liability.

Fair Value of Financial Liabilities Recorded at Amortized Cost

The following tables present the carrying amounts and fair values of the Registrants’ short-term liabilities, long-term debt, and trust preferred securities (long-term debt to financing trusts or junior subordinated debentures) as of September 30, 2022 and December 31, 2021. The Registrants have no financial liabilities classified as Level 1.

The carrying amounts of the Registrants’ short-term liabilities as presented in their Consolidated Balance Sheets are representative of their fair value (Level 2) because of the short-term nature of these instruments.


	September 30, 2022								December 31, 2021
	Carrying Amount		Fair Value						Carrying Amount		Fair Value
			Level 2		Level 3		Total				Level 2		Level 3		Total
Long-Term Debt, including amounts due within one year(a)
Exelon	$	36,583	$	28,654	$	2,270	$	30,924	$	32,902	$	34,897	$	2,217	$	37,114
ComEd	10,517		8,783		—		8,783		9,773		11,305		—		11,305
PECO	4,612		3,747		50		3,797		4,197		4,740		50		4,790
BGE	4,207		3,539		—		3,539		3,961		4,406		—		4,406
PHI	8,130		4,434		2,220		6,654		7,547		5,970		2,167		8,137
Pepco	3,752		2,179		1,174		3,353		3,445		3,201		975		4,176
DPL	1,938		1,143		446		1,589		1,810		1,426		552		1,978
ACE	1,758		903		600		1,503		1,582		1,091		641		1,732
Long-Term Debt to Financing Trusts
Exelon	$	390	$	—	$	385	$	385	$	390	$	—	$	470	$	470
ComEd	205		—		204		204		205		—		248		248
PECO	184		—		181		181		184		—		222		222

__________

(a)Includes unamortized debt issuance costs, unamortized debt discount and premium, net, purchase accounting fair value adjustments, and finance lease liabilities which are not fair valued. Refer to Note 15 - Debt and Credit Agreements of the 2021 Recast Form 10-K for unamortized debt issuance costs, unamortized debt discount and premium, net, and purchase accounting fair value adjustments and Note 10 - Leases of the 2021 Recast Form 10-K for finance lease liabilities.

Recurring Fair Value Measurements

The following tables present assets and liabilities measured and recorded at fair value in the Registrants' Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of September 30, 2022 and December 31, 2021:

Exelon


	As of September 30, 2022						As of December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	664	$	—	$	—	$	664	$	524	$	—	$	—	$	524
Rabbi trust investments
Cash equivalents	62		—		—		62		60		—		—		60
Mutual funds	49		—		—		49		60		—		—		60
Fixed income	—		8		—		8		—		10		—		10
Life insurance contracts	—		57		39		96		—		61		37		98
Rabbi trust investments subtotal	111		65		39		215		120		71		37		228
Mark-to-market derivative assets	—		—		24		24		—		—		—		—
Total assets	775		65		63		903		644		71		37		752
Liabilities
Mark-to-market derivative liabilities	—		—		(67)		(67)		—		—		(219)		(219)
Deferred compensation obligation	—		(68)		—		(68)		—		(131)		—		(131)
Total liabilities	—		(68)		(67)		(135)		—		(131)		(219)		(350)
Total net assets (liabilities)	$	775	$	(3)	$	(4)	$	768	$	644	$	(60)	$	(182)	$	402

__________

(a)Exelon excludes cash of $384 million and $464 million as of September 30, 2022 and December 31, 2021, respectively, and restricted cash of $225 million and $49 million as of September 30, 2022 and December 31, 2021, respectively, and includes long-term restricted cash of $83 million and $44 million as of September 30, 2022 and December 31, 2021, respectively, which is reported in Other deferred debits in the Consolidated Balance Sheets.

ComEd, PECO, and BGE


	ComEd								PECO								BGE
As of September 30, 2022	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	354	$	—	$	—	$	354	$	10	$	—	$	—	$	10	$	1	$	—	$	—	$	1
Rabbi trust investments

Mutual funds	—		—		—		—		8		—		—		8		7		—		—		7
Life insurance contracts	—		—		—		—		—		15		—		15		—		—		—		—
Rabbi trust investments subtotal	—		—		—		—		8		15		—		23		7		—		—		7
Mark-to-market derivative assets(b)	—		—		24		24		—		—		—		—		—		—		—		—
Total assets	354		—		24		378		18		15		—		33		8		—		—		8
Liabilities
Mark-to-market derivative liabilities(b)	—		—		(67)		(67)		—		—		—		—		—		—		—		—
Deferred compensation obligation	—		(7)		—		(7)		—		(7)		—		(7)		—		(4)		—		(4)
Total liabilities	—		(7)		(67)		(74)		—		(7)		—		(7)		—		(4)		—		(4)
Total net assets (liabilities)	$	354	$	(7)	$	(43)	$	304	$	18	$	8	$	—	$	26	$	8	$	(4)	$	—	$	4


	ComEd								PECO								BGE
As of December 31, 2021	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	237	$	—	$	—	$	237	$	9	$	—	$	—	$	9	$	—	$	—	$	—	$	—
Rabbi trust investments
Mutual funds	—		—		—		—		11		—		—		11		14		—		—		14
Life insurance contracts	—		—		—		—		—		16		—		16		—		—		—		—
Rabbi trust investments subtotal	—		—		—		—		11		16		—		27		14		—		—		14
Total assets	237		—		—		237		20		16		—		36		14		—		—		14
Liabilities
Mark-to-market derivative liabilities(b)	—		—		(219)		(219)		—		—		—		—		—		—		—		—
Deferred compensation obligation	—		(10)		—		(10)		—		(9)		—		(9)		—		(7)		—		(7)
Total liabilities	—		(10)		(219)		(229)		—		(9)		—		(9)		—		(7)		—		(7)
Total net assets (liabilities)	$	237	$	(10)	$	(219)	$	8	$	20	$	7	$	—	$	27	$	14	$	(7)	$	—	$	7

__________

(a)ComEd excludes cash of $39 million and $105 million as of September 30, 2022 and December 31, 2021, respectively, and restricted cash of $95 million and $42 million as of September 30, 2022 and December 31, 2021, respectively, and includes long-term restricted cash of $83 million and $43 million as of September 30, 2022 and December 31, 2021, respectively, which is reported in Other deferred debits in the Consolidated Balance Sheets. PECO excludes cash of $93 million and $35 million as of September 30, 2022 and December 31, 2021, respectively. BGE excludes cash of $20 million and $51 million as of September 30, 2022 and December 31, 2021, respectively, and restricted cash of $129 million and $4 million as of September 30, 2022 and December 31, 2021, respectively.

(b)The Level 3 balance consists of the current asset of $24 million and current and noncurrent liability of none and $67 million, respectively, as of September 30, 2022 and none, $18 million and $201 million, respectively, as of December 31, 2021 related to floating-to-fixed energy swap contracts with unaffiliated suppliers.

PHI, Pepco, DPL, and ACE


	As of September 30, 2022								As of December 31, 2021
PHI	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	266	$	—	$	—	$	266	$	110	$	—	$	—	$	110
Rabbi trust investments
Cash equivalents	59		—		—		59		59		—		—		59
Mutual funds	10		—		—		10		14		—		—		14
Fixed income	—		8		—		8		—		10		—		10
Life insurance contracts	—		22		38		60		—		27		35		62
Rabbi trust investments subtotal	69		30		38		137		73		37		35		145
Total assets	335		30		38		403		183		37		35		255
Liabilities
Deferred compensation obligation	—		(14)		—		(14)		—		(18)		—		(18)



Total liabilities	—		(14)		—		(14)		—		(18)		—		(18)
Total net assets	$	335	$	16	$	38	$	389	$	183	$	19	$	35	$	237


	Pepco								DPL								ACE
As of September 30, 2022	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	76	$	—	$	—	$	76	$	157	$	—	$	—	$	157	$	1	$	—	$	—	$	1




Rabbi trust investments
Cash equivalents	59		—		—		59		—		—		—		—		—		—		—		—

Life insurance contracts	—		22		38		60		—		—		—		—		—		—		—		—
Rabbi trust investments subtotal	59		22		38		119		—		—		—		—		—		—		—		—
Total assets	135		22		38		195		157		—		—		157		1		—		—		1
Liabilities
Deferred compensation obligation	—		(1)		—		(1)		—		—		—		—		—		—		—		—



Total liabilities	—		(1)		—		(1)		—		—		—		—		—		—		—		—
Total net assets	$	135	$	21	$	38	$	194	$	157	$	—	$	—	$	157	$	1	$	—	$	—	$	1


	Pepco								DPL								ACE
As of December 31, 2021	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	31	$	—	$	—	$	31	$	43	$	—	$	—	$	43	$	—	$	—	$	—	$	—
Rabbi trust investments
Cash equivalents	58		—		—		58		—		—		—		—		—		—		—		—


Life insurance contracts	—		27		35		62		—		—		—		—		—		—		—		—
Rabbi trust investments subtotal	58		27		35		120		—		—		—		—		—		—		—		—
Total assets	89		27		35		151		43		—		—		43		—		—		—		—
Liabilities
Deferred compensation obligation	—		(2)		—		(2)		—		—		—		—		—		—		—		—



Total liabilities	—		(2)		—		(2)		—		—		—		—		—		—		—		—
Total net assets	$	89	$	25	$	35	$	149	$	43	$	—	$	—	$	43	$	—	$	—	$	—	$	—

__________

(a)PHI excludes cash of $186 million and $100 million as of September 30, 2022 and December 31, 2021, respectively, and restricted cash of $1 million and $3 million as of September 30, 2022 and December 31, 2021, respectively. Pepco excludes cash of $21 million and $34 million as of September 30, 2022 and December 31, 2021, respectively, and restricted cash of $1 million and $3 million as of September 30, 2022 and December 31, 2021, respectively. DPL excludes cash of $49 million and $28 million as of September 30, 2022 and December 31, 2021, respectively. ACE excludes cash of $111 million and $29 million as of September 30, 2022 and December 31, 2021, respectively.

Reconciliation of Level 3 Assets and Liabilities

The following tables present the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis during the three and nine months ended September 30, 2022 and 2021:



	Exelon		ComEd			PHI and Pepco
Three Months Ended September 30, 2022	Total		Mark-to-Market Derivatives			Life Insurance Contracts
Balance as of June 30, 2022	$	(50)	$	(88)		$	37
Total realized / unrealized gains
Included in net income(a)	1		—			1


Included in regulatory assets/liabilities	45		45		(b)	—








Balance as of September 30, 2022	$	(4)	$	(43)	(c)	$	38
The amount of total gains included in income attributed to the change in unrealized gains related to assets and liabilities as of September 30, 2022	$	1	$	—		$	1



	Exelon		ComEd			PHI and Pepco
Three Months Ended September 30, 2021	Total		Mark-to-Market Derivatives			Life Insurance Contracts
Balance as of June 30, 2021	$	(231)	$	(265)		$	34
Total realized / unrealized gains


Included in regulatory assets	51		51		(b)	—








Balance as of September 30, 2021	$	(180)	$	(214)		$	34
The amount of total gains included in income attributed to the change in unrealized gains related to assets and liabilities as of September 30, 2021	$	—	$	—		$	—


	Exelon		ComEd			PHI and Pepco
Nine months ended September 30, 2022	Total		Mark-to-Market Derivatives			Life Insurance Contracts
Balance as of December 31, 2021	$	(182)	$	(219)		$	35
Total realized / unrealized gains
Included in net income(a)	3		—			3


Included in regulatory assets/liabilities	176		176		(b)	—







Transfers out of Level 3	(1)		—			—
Balance as of September 30, 2022	$	(4)	$	(43)	(c)	$	38
The amount of total gains included in income attributed to the change in unrealized gains related to assets and liabilities as of September 30, 2022	$	3	$	—		$	3


	Exelon		ComEd			PHI and Pepco
Nine Months Ended September 30, 2021	Total		Mark-to-Market Derivatives			Life Insurance Contracts
Balance as of December 31, 2020	$	(267)	$	(301)		$	34
Total realized / unrealized gains
Included in net income(a)	2		—			2


Included in regulatory assets	87		87		(b)	—

Purchases, sales, and settlements



Settlements	(2)		—			(2)


Balance as of September 30, 2021	$	(180)	$	(214)		$	34
The amount of total gains included in income attributed to the change in unrealized gain related to assets and liabilities as of September 30, 2021	$	2	$	—		$	2

__________

(a)Classified in Operating and maintenance expense in the Consolidated Statements of Operations and Comprehensive Income.

(b)Includes $51 million of increases in fair value and a decrease for realized gains due to settlements of $6 million recorded in purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the three months ended September 30, 2022. Includes $49 million of increases in fair value and an increase for realized losses due to settlements of $2 million recorded in purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the three months ended September 30, 2021. Includes $179 million of increases in fair value and an decrease for realized losses due to settlements of $3 million recorded in purchase power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the nine months ended September 30, 2022. Includes $72 million of increases in fair value and an increase for realized losses due to settlements of $15 million recorded in purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the nine months ended September 30, 2021.

(c)The balance consists of $24 million of current assets and current and noncurrent liability of none and $67 million, respectively, as of September 30, 2022.

Valuation Techniques Used to Determine Fair Value

Exelon’s valuation techniques used to measure the fair value of the assets and liabilities shown in the tables below are in accordance with the policies discussed in Note 16 — Fair Value of Financial Assets and Liabilities of the 2021 Recast Form 10-K.

Mark-to-Market Derivatives (Exelon and ComEd)

The table below discloses the significant unobservable inputs to the forward curve used to value mark-to-market derivatives.


Type of trade	Fair Value as of September 30, 2022		Fair Value as of December 31, 2021		Valuation Technique	Unobservable Input	2022 Range & Arithmetic Average				2021 Range & Arithmetic Average
Mark-to-market derivatives	$	(43)	$	(219)	Discounted Cash Flow	Forward power price(a)	$36.02	-	$111.10	$50.61	$28.65	-	$47.10	$33.96

________

(a)An increase to the forward power price would increase the fair value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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